IMF holds Nigeria growth forecast t 3.3% for 2024

The International Monetary Fund (IMF) has upheld its growth projection for Nigeria's economy at 3.3 per cent for the year 2024, a slight increase from the previous year's 2.9 per cent. This forecast, the IMF explained, is buoyed by improvements in the services and trade sectors within the country.

Despite this optimistic outlook, the IMF cautioned that Nigeria still faces significant challenges, particularly concerning food security, as evidenced by a staggering 40% increase in food price inflation in March. Axel Schimmelpfenning, the IMF mission chief for Nigeria, emphasized the gravity of the situation, highlighting that a growth rate of 3.3% barely surpasses the rate of population growth, posing a considerable obstacle.

In response to these challenges, Nigeria's President, Bola Tinubu, has implemented sweeping reforms over the past year. These reforms include the reduction of costly petrol and electricity subsidies and the devaluation of the national currency, the naira, twice within a year to bridge the gap between official and parallel market exchange rates.

One of the focal points of these reforms is to enhance economic growth to tangibly improve the living standards of Nigerians. However, the IMF cautioned that eliminating fuel subsidies, which could account for up to 3% of GDP this year, would require gradual phasing out over the next one or two years.

Acknowledging the significant progress made through reforms, global rating agencies have revised Nigeria's economic outlook upwards. However, Schimmelpfenning stressed that resolving deep-seated issues accumulated over many years will take time, and immediate solutions cannot be expected.

To address these challenges effectively, the IMF emphasized the importance of scaling up cash transfer programs and augmenting government revenues to enhance service provision to citizens. Additionally, the IMF commended the recent interest rate hikes by the Central Bank of Nigeria (CBN) to curb inflation but urged a data-driven approach for further tightening.

Furthermore, the IMF recommended that the CBN bolster its foreign exchange reserves and adopt a transparent and balanced framework for forex interventions to mitigate excessive short-term volatility in the exchange rate.